Challenges facing dental practices coming out of lockdown

28th August 2020

Following the relaxation of lockdown and the winding down of the various government support schemes such as the Coronavirus Job Retention Scheme, (CJRS/ furlough scheme)    we discuss the current impacts of the pandemic on dental practices.

What are the challenges currently faced by dental practices?

In addition to having to adapt the way dental practices can operate, all of the commercial and financial issues that have either built up or were put on hold during lockdown will now start becoming more urgent. Some practices may not have had to pay rent, may have furloughed their staff and perhaps even obtained government financial support as well as enjoying the HMRC holiday. With the reduced enforcement options available to creditors and all of the schemes aimed at helping businesses survive soon coming to an end, many dental practices may find themselves in troubled waters.

Rent payment options

From 30 September, landlords will be able to forfeit leases where rent has not been paid and/or there is no agreement in place to deal with the outstanding rent. Creditors can also then start pursuing unpaid debts by way of insolvency proceedings. For dental practices that took a rent payment holiday but may not have discussed payment plans with their landlord, this could become a major issue.

The winding down of the furlough scheme

From the start of September, the payments under the Coronavirus Job Retention Scheme (and its equivalent for the self-employed) started to reduce. Whereas 80% of an employee’s wages (up to £2,500) was covered initially, from 1 September the grant tapers down to cover 70%, capped at £2,187.50, and the employer will have to pay 10% to top it up to 80%. From 1 October the CJRS tapers down even further to 60% with employers paying 20% – again to top up to 80%. The last day to make a claim is 30 November 2020. The increase to the wage bill must be taken into account.

Feeling the squeeze

Dental practices will also have started seeing an increase in their trading expenses at the same time that even the most prepared and efficient operators will be generating just 60%-70% of their pre-lockdown private income. This will only be exacerbated by also having to start funding or repaying those liabilities and debts that have accrued over the past several months.

In addition to this, a dental practice’s own patients will also be feeling the squeeze. They may find themselves at risk of redundancy with some uncertainty surrounding their own financial affairs and therefore having to make tough decisions on whether they continue to pay into capitation schemes, or seek non-urgent dental treatments and attend dental surgeries. It also appears that for the foreseeable future areas of the country may have local lockdowns imposed upon them which may also need to be taken into consideration.

What should dental practices do as the pandemic progresses?  

Owners of dental practices should:

  • Take the opportunity to fully review their current financial position
  • Understand the liabilities that they have incurred to date during the pandemic
  • Assess what income they expect to receive over the coming period and determine what the trading costs/expenses associated with this will be.

In short, we would recommend that you undertake a full review of your cash flow and cash requirements for at least a 13 week period, and then beyond. Should you have any queries or need advice and support, please contact Clare Emery in our Health and Social Care team or Alan Meiklejohn.